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10 Sept 2018

With rumours swirling in Washington that the White House could greenlight as early as during the week of 10 September additional tariffs on a third tranche of mainland Chinese products under Section 301 of the Trade Act of 1974, a coalition of more than 150 U.S. industry associations wrote to U.S. Trade Representative Robert Lighthizer on 6 September in a last-ditch effort to persuade the administration not to impose such tariffs. According to Reuters, however, President Trump said on 7 September that “the $200 billion we are talking about could take place very soon” and warned that “behind that there is another $267 billion ready to go on short notice if I want.” According to Trump, the additional US$267 billion in tariffs would change “the equation” in the current trade dispute.

The associations warned in their letter that continuing the tit-for-tat escalation with mainland China “only serves to expand the harm to more U.S. economic interests, including farmers, families, businesses, and workers”, as “unilaterally imposing tariffs on hundreds of billions of dollars in goods invites retaliation and has not resulted in meaningful negotiations or concessions.” While the associations acknowledged that long-standing issues in mainland China have negatively impacted many U.S. companies, they stressed that applying high duties on mainland Chinese products raises costs on U.S. businesses and consumers and reduces U.S. competitiveness without facilitating bi-lateral negotiations in any way. Moreover, once the tariffs are imposed “taking them down may not happen anytime soon, as both sides harden their positions.”

The letter also tries to dispel incorrect assumptions that U.S. companies can simply move their production out of mainland China, noting that global supply chains are “extremely complex” and take years to build. The associations noted that for any product a U.S. importer “would have to determine if any alternative supplier in another country could meet the cost, quality, safety, compliance and certification requirements to sell its product in the U.S. market or other foreign markets”, and, even if these criteria are met, “the capacity for foreign suppliers to meet demand presents another key challenge.” Accordingly, any efforts by the U.S. government to use tariffs as a means to compel U.S. companies to change their sourcing strategies are unequivocally opposed by the associations.

Finally, as to the suggestion that the United States may impose tariffs on all imports from mainland China, the letter states that “should all trade to and from China be subject to tariffs, the impacts and disruptions to the U.S. economy would reach across the entire country, from sector to sector, and negatively impact every American family.”

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